The Challenges of Growing a Marketplace in the Childcare Space

00:01 Desi It takes a pandemic to realise how important childcare is for a properly functioning society. With parents working from home and schools being closed the topic of affordable and flexible childcare has never been more pressing. I spoke to Ari Last, founder of Bubble, to find out how their product is helping parents to get their flexibility back. Bubble is an app that allows you to book on-demand childcare offered by vetted and insured sitters. They were founded in 2016 and currently have 130,000 people on the platform. Here’s what Ari’s got to share about their journey so far and why he thinks that lower pricing can sometimes harm your growth.

00:58 Desi Hi Ari, welcome to The Product Show.

01:01 Ari Last Hi, thanks for having me!

01:03 Desi A pleasure to have you here. Thank you very much for spending some time with us. Tell us a bit about yourself. You come from an online betting background. You also spent some time in finance, but in the end you founded Bubble. That’s a very different path. Can you tell us a bit more how you ended up here.

01:24 Ari Last Yes, sure. I actually did Broadcast Journalism at university I’m a bit sports fan, football in particular, so my first job was actually sports commentary for the UEFA and I did that for a year which was brilliant, but I quickly realised that I was passionate about getting into business and getting into a great company. The opportunity came around to work for Betfair which was and still is a really great company amazing technology pretty cool if you’re a sports fans as, so I spent 5 years at Betfair doing various things from PR and corporate affairs to business development in the Emerging markets I really wanted to get into the startup scene and fintech. This was about 2013 and fintech was really coming to the fore at that point you had Funding Circle and MarketInvoice who I ended up joining. One of the first employees there. It was an invoice trading platform, so it was quite similar to Betfair actually, it was an online marketplace connecting buyers and sellers, and using technology to drive amazing efficiency and customer experiences ultimately. I did nearly 3 years there which was a really wild ride. A great ride, I learned a huge amount and at the same time, going in my personal life, I got married. So I had children as I’m sure most parents will tell you, I quickly realized within probably hours, if not days of having my first son that this is just an impossible job It just felt extremely, extremely difficult, too difficult. It was 2013 at the time where consumer technology and apps were making apps life so easy. It immediately struck me as quite funny, but also bonkers how parenting and having kids. I just felt completely left behind by technology so quite quickly the seeds have been sown. That there’s millions of parents going through the same problem. They’re incredibly stressed, incredibly time-poor and not really serviced particularly well with new digital products. The lack the childcare is what really struck me as the reason behind all of that. And again, looking at what was out there, the solutions were terrible parents just found it so incredibly hard to find trusted childcare on demand. Bubble was a fusing of that personal pain point I had, but also the work I’ve done at Betfair and MarketInvoice where I’d seen how marketplaces and matching supply and demand can result in this great products winning products. Bubble was a marriage of that really.

04:34 Desi Tell us a bit more about the early days when you were starting. Marketplaces are really huge exercise, aren’t they? You have to balance supply and demand, some say it’s a bit like the chicken and the egg problem. How did you approach early growth and acquisition in the first few months?

04:54 Ari Last Our first beta product was out towards the end of 2016 we never had much cash for a while actually to build the product or look for growth I felt and I still feel that with childcare such a highly sensitive area it’s probably different than some other products or startups. Naturally, with good reason, the conventional reason is you need to move fast, break things, get your MVP out there. You need to get stuff out quickly and there’s so much truth to that which obviously applies to Bubble. But at the same time we’re a childcare product, we can’t do that. It’s not a game, it’s not something that if it breaks or goes wrong. And that’s fine and you just iterate and fix it. From that perspective, we needed to spend quite a lot of time on the product not gold-plating it, but making sure it was fit for purpose from the early days. And as you say, with the marketplace it’s all about supply & demand, especially a trust-based marketplace Bubble USP is social validation. Going back to how we started, the idea really came about with the realization. That when it comes to choosing childcare, trust is absolutely everything but actually – how do you give that trust? How do parents gain that trust? Traditional in childcare. You have bricks and mortar traditional vetting agency a third party will vet the carer and that would give parents trust that’s how it’s always been looked at and we looked at it from a completely different way. Because I fundamentally don’t believe that’s true. Actually when you look at how parents choose their carers it’s all driven, almost entirely by social recommendation and word of mouth. We want to know who our friends trust for their kids. Because that’s more powerful than any piece of paper or check that a third-party can do on this person it’s baked into our app. Our app sits on top our technology is our social graph which is trying to connect parents to trusted careers in their area by mutual contacts. But again, when you’re starting out, that’s a chicken and egg problem not only do you need to match the demand with supply in terms of numbers, but for the product to really come to live, you want parents going on the app, getting options of careers their friends have actually used. And that’s a massive benefit to the business this is a network effect – the more parents use it, the more their friend use it the more powerful the product becomes, but it definitely poses unique challenges around that marketplace dynamic. Especially for us, they other challenge for Bubble is. No one has done this before. We’re dealing with the most sensitive subject that a consumer faces. It’s not been disrupted and there’s no innovation, largely because a lot of people don’t want to go near it really, even that’s such an obvious problem, such a big problem, and also, we were the first doing it so we were introducing a new concept to parents on a highly sensitive area, without budget. Same as a lot of startups try, really gritty and hack at the beginning. It actually starts with friends and family Facebook groups, local flyering. Just really really hands-on trying to get those first 100 customers, or even first 10 customers I still remember the first job that ever came in. And I still remember being excited when we had 5 jobs in a day or I checked my phone when I was in a meeting and we had a job posted. Especially with our nature, those first 100 customer, they’re doing the work for the next 2,000 in their area. They’re the guys booking the first sits, leaving the first reviews. We were really focused on doing the totally non-scalable things to win those first customers. 

09:06 Desi Let’s talk a bit more about how this Safety and Security challenges are addressed by the product itself. Childcare on demand, even though that the industry has matured and the consumer matured since 2016, childcare on demand is probably still a bit of a novel idea to most parents. Uber for babysitters is not necessarily something that would appeal to most parents. How does the product address this? Have you built anything specific to make sure that the safety checks properly handled by the product and parents feel comfortable using the product?

09:52 Ari Last Yeah, we’ve done many things. We’re a marketplace platform but we’re not an open marketplace. Our starting point hasn’t been how do we build. A vetting process which is like good enough and would allow us to scale. That’s not been out point of view. It’s actually How do we build the safest and smartest platform in the world. What do we actually need? What checks are actually valuable that parents actually want and let’s build them. And a nice by-product of that is it’s super scalable operationally as well. Because as I said you don’t need physical bricks and mortar style vetting, there’s far smarter tools that you can actually use that are scalable, which is what we do. From the actual checks perspective, we do identity checks, online background checks we built a reference checks collection tool. We have video checks, we have Skype interviews. We have a 10-step process which sitters have to go through before getting approved. 9% of those who sign up get approved. We deliberately made it… Most of the time in product you’re trying to get rid of any friction in your process. This is the opposite. Largely as well because we have an enormous supply of fantastic careers. It has afforded us the luxury of making the process incredibly difficult to get through. On one hand, we built lots of different tools. Some of which are mandatory, some of which give the ability to upskill their profiles and make themselves more desirable to parents. But then the other point which we’re really focused and hot on is the transparency of the product with parents. What parents don’t like about typical agencies experience is they get sent people. And that feels very impersonal it feels you have a lack of control. And in childcare that’s massively important. With Bubbles is the opposite, what parents really love about the service is that the app gives them control, flexibility and visibility of which career they want to select. We built that into the product. That poses challenges because with an on-demand transactional product you want to take as many steps out from request to confirmation of a shift or a job, whereas we had to build extra ones in because it’s critical to parents that they get that ability to discover the careers and choose them themselves. We really tackled that by yes, we do a number of checks to actually ensure quality at scale, but also it’s about positioning of the product and making parents really aware they’re in control. The “Uber for babysitting” which you rightly mentioned because I guess anyone doing a marketplace for anything is Uber for that, but in some respect. We’ve been called not only Uber for babysitting, but Tinder for babysitting, Amazon Prime for babysitting, Deliveroo. There’s was once a big Daily Telegraph article about us where they said we do Deliveroo for your babysitter and it was a really positive article by the journalist who had a great experience with us but those things don’t help. Well, they help in some respect Like when we were first starting it was the easiest way for people rightly or wrongly, for journalist or whoever to quickly understand what you do. You can’t really fight against that to such degree. There’re lots of Truspilot reviews of Bubble where parents writing glowing reviews and they say “Bubble is amazing, it’s like the Uber for babysitting.” You can’t stop it to some degree, but it’s harmful, because in childcare like you rightly point out, the idea of tapping a button and someone showing up like an Uber driver or a Deliveroo rider is really scary. It’s anxiety-inducing. But Bubble works in the completely opposite way. The actual product experience – yes, it’s really quick to put in what you need, send it out there to our network and get applicants back. So that product experience is really sleek and easy, but critically you then choose the candidate that you want. And if you don’t want to go with any candidate you don’t choose anyone Sometimes that’s lost. I’ve done plenty of interviews. Once I was given a really hard time on BBC London Radio. The Drivetime guy was totally in for us on this idea that “my child is not a pizza” which is a ridiculous thing to say for lots of reasons I really had to explain to him how the process works that it’s actually about quickly getting amazing applicants back which you have control to use. So it’s about the checks we do and the quality of the careers, obviously, we’re massively focused on that. But it’s about positioning to the parents and what they love about Bubble is how the product gives them control and transparency. 

15:04 Desi Tell is a little bit more about the retention tactics you use to make people come back to the app it’s an incredibly fine balance, isn’t it? You don’t want to come across as too salesy, you’re not a food delivery app, but at the same time. You have to “nurture” your growth graph. What do you do, what tactics do you use to make sure people come back other than relying on their needs and external circumstances? 

15:29 Ari Last There’s two elements I guess to your question, if I understand it correctly. One – there’s always a leakage risk, especially with trust-based marketplaces where you’re introducing people to a relationship where trust is important. There’s always a leakage risk if they go offline, and that affects many marketplaces. And then there’s just the element of how you keep front of mind and you’re right, we hate being and we’re not too salesy because this is an emotional, sensitive subject. On the latter point, ultimately we always just try to be authentic and empathetic. We see ourselves and we try to build our brand as a parent champion. Especially at the moment, working parents are a massive focus for us especially during the pandemic because as a business we’re massively affected, so you’re kind of racing. All the time – How do we switch this around? How do we drive demand? where naturally some of this has been closed off to us you’re tempted to go very salesy, but our approach has been – How can we be helpful? Because I think with parents and childcare trust is everything. They’ll only trust you if you strike them as authentic. A lot of our customer and other observers of our business has written to us during the pandemic, really complimenting our tone of voice and how we’ve been communicating with customers during that time because it has really come from a place “What can we do to help?” rather than being overly pushy. So for us we have a job to do to actually educating users that childcare doesn’t have to be this rare thing. Only when you’re only absolutely desperate or when you have something big planned I think it feels like a luxury to a lot of people showcasing how it doesn’t have to be it’s how we keep them coming back and how we increase frequency along with launching new products and new ways to actually book childcare, which especially has been relevant during the pandemic. And on the leakage front – it’s a difficult one I think our business is slightly different. Because the whole product is about spontaneity and flexibility. Time-sensitivity drives a lot of the demand, as opposed to your regular cleaner who comes 10am every Tuesday forever, until you don’t need them anymore. This is different. A huge portion of our bookings are made with less than 48h and 24h notice. So even if you want to go offline, even if you want to use your sitter offline. Often you can’t and that’s more reasons to come back to the app but actually on the whole leakage point, I’m not gonna lie and say we don’t think about it and don’t look at it, but generally it’s been about. How do we build a product that people want to use.

18:27 Desi Let’s talk a little bit about the pandemic, you mentioned it a few times. Your business is one of the sectors that is hard for me to put my finger and say this was really hard for you or this is actually helping your business. On one side people reluctant to invite strangers to there homes but on the other side, schools are closed, we’re all desperate for some help. Tell us a little bit more about how the dynamics of your business changed. Did you need to introduce any new offerings? How has it impacted you?

19:02 Ari Last Yeah, it’s funny… I was speaking to another startup in the childcare space and we were laughing how people kept coming up to us and saying “Oh My God, you must be doing amazingly!”, because as you’re saying everyone needs childcare. So look I’m not giving away any secrets saying that it’s not being good for our business. It’s definitely not the optimum conditions for growth. Obviously so many sectors and businesses have been hit in a massive way, but there’s something quite unique about looking at Bubbles specifically at how we’ve been hit. We’re a business that typically relies on people going out and having people in their home. Not one or the other – both! Those are the two things that consumers stopped doing So definitely it’s not been great I would have never wished it from a business perspective. However, as you rightly mentioned, where we’ve seen a complete collapse of the evening economy, full stop, which is obviously affecting us. Like the evening bookings. We were never totally relying on it, but it was always what we predominantly do. Those are out of the window. The use case of working parents at home, needing daytime care shot up. We have absolutely benefited from that regard and it’s a contributing factor why our business, don’t get me wrong it’s not like a growth environment for Bubble, but actually what the pandemic has shown and our investors and people who I speak to are massively impressed is the we’ve done pretty well. We’ve maintained pretty robust numbers.

20:44 Desi What do you think is the biggest challenges for the industry now in 2021? And how do you see it evolving in the next few years?

20:54 Ari Last I think there’s more innovation happening in childcare, there’s Bubble and other companies attacking slightly different segments of the market, which is good. But I think a real challenge and again one of the issues that Covid has shone a light on is, and this one of the systemic challenges in the childcare sector, is how do you build a mass-market solution from a parenting perspective, while at the same time ensuring that careers are paid well and properly, what they deserve. One reality you can’t get away from in childcare is – it’s expensive. And the solution that nobody wants is a solution that solves one issue, by making it affordable for parents while driving down prices for careers. To be honest, that’s a systemic issue long before Covid but I think particularly in light of Covid and the childcare sector, whether it’s nurseries or childminders, and the whole sector in general and the careers side has been massive affected. So how do we build a solution which is gonna make childcare more affordable and accessible to a mass market of parents. Because look, there are non-price sensitive, more niche group of affluent parents who have services or segments of services available to them and they can afford it. But actually the mass market of parents who need childcare it’s expensive, so that’s a real issue. That’s a real challenge and we’re really focused on thinking hard how we can build a product, we want to care for all parents needs but we’ve always come from a place trying to build a mass market solution. So that’s challenge is one we’re thinking on how to overcome I think the other challenge is as we mentioned is getting back to work impact of Covid on working mothers and how do we ensure that they’re not massively impacted in a negative way and access to childcare is a huge part of the solution. It’s not gonna be just Bubble that solves it, it’s gonna come from the government, companies and other provides. It’s an enormous problem that’s too big for one company to solve although I hope and we’re ambitious. We’re gonna try and to our best.

23:17 Desi Let’s go back to the product. Tell me about an interesting growth experiment you’ve done internally and what were the findings from it?

23:28 Ari Last One thing we did recently was we ran a pricing experiment for 3 or 4 months we ran it. We did an A/B test effectively, we had the booking fees on the app we had two different sets of pricing for a booking fee. The output from it was the higher fees had no impact on new activations or new users which was really insightful in a way, because I had, not just me, but largely me, you have a worry, as I was talking earlier, childcare is expensive. We put a huge amount into our service and we think we’re getting amazing value but keeping it affordable is a challenge when you’re approaching mass market. So we think a lot about our pricing. We ran this A/B test experiment. It almost surprisingly in a way it made no impact. The pricing is one thing I’ve always massively struggled to test for. The natural thing people tell you is test, test, test. A/B test everything. I’ve always found that really difficult to do with pricing because so much of how customers respond to a pricing is framing and behavioral economics. Asking customers what they paid for something is impossible. You need to see what they do. I think pricing testing is really hard, full stop. But actually, running the experiment and seeing no impact really it kind of proved out some of our hypotheses which is. Price for a product like ours isn’t the determining factor. It’s trust. We know parents need our service and our price is only a fraction of the overall price that they’re paying for childcare and it proved that out for us. Naturally, instinctively you could think – lower my pricing and I will get more customers. That’s not actually true. Sometimes that has the opposite effect. If you want customers to value your service in a way you need to charge them. And as I was saying framing is so important. If you charge a really low amount or if you give it away for free all of a sudden that benchmark is set and your customer believes your product is not worth anything. Then when you try to raise it later or try to explain to them why it is. It’s a really hard battle to win. So that was something we did recently which was really interesting for us.

26:06 Desi Before I let you go Ari, can you tell – have you discovered the Aha! Moment for Bubble? Have you done tests on this side?

26:15 Ari Last The Wow! Moment for Bubble is when a parent opens the door for a first time to that sitter the fair first booking on the app. That’s when they realise actually this is a real person. There’s nothing novel or scary about this process of using an app like Bubble to find this person. One of our early investors, she actually invested in the business before she actually used. It’s only a couple of months later when she used it and I got a frantic call from her – delighted, excited I just had my sitter show up, she was obviously just leaving the house. It really hit me how brilliant that service really is. And all that anxiety is washed away. Because ultimately, for all the technology. All the product – it’s about the quality of that person showing up. That’s what parents really care about. That Wow moment, or that game-changing moment is getting that. That first interaction right. So we place a lot of focus and emphasis on how do we ensure, in a way that fits our model, fits our operating process, that that is really fantastic moment. And when that works it kind of almost sets the customer up for life going forward on Bubble. They could have less good experience, the less good experience could happen on sit 2 or sit 6. At that point they trust the process, they trust the product and they could understand. Some nannies are better than others or get on better with my kids than others. If they don’t have that first experience, they just lose faith in the whole concept. So that’s the moment for us. That we’re really focused on. 

28:10 Desi So nailing that first-time experience for your customer is your primary focus. Thank you so much for your time, Ari! I wish you all the best with Bubble Hopefully Covid’s gonna be gone soon and we gonna see the business exploding. It’s an amazing product, all the best! 

28:26 Ari Last Thanks!